SCOTUS To Take Up Legal Challenge to ACA Subsidies

On Friday, the Supreme Court announced that it will hear a case -- King v. Burwell -- that challenges subsidies to help U.S. residents purchase health insurance plans through the Affordable Care Act's federal insurance exchange, the New York Times reports (Liptak, New York Times, 11/7).

Background

A May 2012 Internal Revenue Service rule allows the subsidies to be used in an exchange administered either by a state or the federal government. The suit's plaintiffs argued that the IRS rule should be invalidated because it contradicts what Congress originally wrote in the ACA.

The 4th U.S. Circuit Court of Appeals ruled to uphold the subsidies. Plaintiffs in the case then asked the Supreme Court to review the issue (California Healthline, 11/4).

Arguments in the case likely will be presented in February or March of next year. The high court likely will decide on the case in June 2015, according to the Times.

Potential Effect

A ruling in the plaintiffs' favor could drastically alter the scope of the law's coverage expansion, according to the Times. If the Supreme Court declares the subsidies are illegal, U.S. residents currently receiving subsidies in states that did not create their own insurance exchanges under the ACA would become ineligible for the credits (New York Times, 11/7).

According to The Hill, roughly 87% of individuals enrolled in ACA coverage through the federal exchange received subsidies. A recent Robert Wood Johnson Foundation report noted that if the court were to rule the subsidies illegal, it would end more than $36 billion in tax credits for those with ACA coverage. In addition, the report said such a ruling could have a "domino effect" on other portions of the law (Ferris [1], The Hill, 11/7).

Michael Carvin, an attorney representing the plaintiffs, said that a ruling in their favor would "mea[n] millions of people are ineligible for subsidies and exempt from the ACA's individual mandate penalty," as well as "hundreds of thousands of employers" being "free of the [ACA]'s employer mandate" (Barnes, Washington Post, 11/7).

Meanwhile, Republican lawmakers in a brief supporting the plaintiffs wrote that the law as it is currently being enforced would result in "tens of billions of dollars of unlawful spending in the next year, and hundreds of billions over the next decade."

Separately, America's Health Insurance Plans Director of Communications Clare Krusing noted that "significant policy changes would be required to ensure an affordable and stable market for consumers were the court to rule against the government."

Reaction

White House press secretary Josh Earnest said the challenge "reflects just another partisan attempt to undermine the [ACA] and to strip millions of American families of tax credits that Congress intended for them to have." He added, "We are confident that the financial help afforded millions of Americans was the intent of the law and it is working as Congress designed" (New York Times, 11/7).

Families USA Executive Director Ron Pollack said the court's decision to hear the case "appears to be a very political act on the part of at least four" justices, which is the number of justices required to vote to hear a case. He added that the decision "really flies in the face of the various guidelines the court uses to decide which cases it will schedule to hear," since there is not a split ruling on the issue in the lower courts (Washington Post, 11/7).

Meanwhile, Oklahoma Attorney General Scott Pruitt (R)  praised the decision, saying, "This Supreme Court review will provide Oklahoma and the 35 other states that did not establish state-based exchanges with immediate and conclusive clarity as to their rights and obligations under the [ACA] so that the states may make appropriate health care policy decisions."

Jonathan Adler -- a law professor at Case Western Reserve University who helped to mount the challenge -- also praised the decision. He said, "The Supreme Court has the opportunity to reaffirm the principle that the law is what Congress enacts, not what the administration or others wish Congress had enacted with the benefit of hindsight"(New York Times, 11/7).

Announcement Could Affect ACA Open Enrollment

Meanwhile, the White House in a statement encouraged individuals to continue enrolling in ACA coverage when the law's second open enrollment period launches on Nov. 15. The statement noted that "nothing has changed: tax credits and affordable coverage remain available" (Ferris [2], The Hill, 11/7).

However, Avalere Health Director Elizabeth Carpenter said the decision "does create a cloud of uncertainty." She explained, "In some ways, stakeholders and key industry groups were beginning to kind of settle into some of the rhythms of the [ACA], and certainly, this adds just another unknown variable" (Ferris, The Hill, 11/8).

Further, Timothy Jost, a law professor at Washington and Lee University, said entities that do not support the ACA will urge individuals not to enroll in coverage because they could lose their plans if the subsidies are taken away. However, he noted that even if the Supreme Court does rule that the subsidies are illegal, IRS would likely publish a rule that would not require enrolled individuals to pay back funds already received. He added that people "can disenroll at any time" should the high court rule against the subsidies (Reichard, CQ HealthBeat, 11/7).